Correlation Between Phillips and HF Sinclair

Can any of the company-specific risk be diversified away by investing in both Phillips and HF Sinclair at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Phillips and HF Sinclair into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Phillips 66 and HF Sinclair Corp, you can compare the effects of market volatilities on Phillips and HF Sinclair and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Phillips with a short position of HF Sinclair. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phillips and HF Sinclair.

Diversification Opportunities for Phillips and HF Sinclair

0.65

Correlation Coefficient

Phillips  HF Sinclair

Poor diversification

The 3 months correlation between Phillips and DINO is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 and HF Sinclair Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HF Sinclair Corp and Phillips is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Phillips 66 are associated (or correlated) with HF Sinclair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HF Sinclair Corp has no effect on the direction of Phillips i.e., Phillips and HF Sinclair go up and down completely randomly.

Pair Corralation between Phillips and HF Sinclair

Considering the 90-day investment horizon Phillips 66 is expected to generate 0.73 times more return on investment than HF Sinclair. However, Phillips 66 is 1.37 times less risky than HF Sinclair. It trades about -0.03 of its potential returns per unit of risk. HF Sinclair Corp is currently generating about -0.11 per unit of risk. If you would invest  13,908  in Phillips 66 on August 30, 2024 and sell it today you would lose (573.00) from holding Phillips 66 or give up 4.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Phillips 66  vs.  HF Sinclair Corp

Phillips 66

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phillips 66 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Phillips is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

HF Sinclair Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HF Sinclair Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Phillips and HF Sinclair

The main advantage of trading using opposite Phillips and HF Sinclair positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phillips position performs unexpectedly, HF Sinclair can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in HF Sinclair will offset losses from the drop in HF Sinclair's long position.

The idea behind Phillips 66 and HF Sinclair Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.